INDUSTRY AND COMMERCE: NEED FOR ENCOURAGEMENT

HL Deb 27 March 1974 vol 350 cc627-91

4.24 p.m.

Debate resumed.

LORD POLWARTH

My Lords, I must admit that it had not been my intention to take part in a debate in your Lordships' House quite so soon after the events of the last few weeks. But having returned only three days ago from a short sojourn abroad and seeing the terms of the Motion down in the name of my noble friend Lord Erroll of Hale I felt bound to say a few words, however ill-prepared they might be. I had certainly not expected to speak from this Bench, nor indeed to be asked to reply to the earlier Statement, and I can only plead the fact that I was hijacked in the Princes' Chamber by my noble friend the Opposition Chief Whip. It is about two years since, as a result of a bit of arm-twisting, I left business for a sojourn in this place in my former capacity, "when"—to adapt the words of Hilaire Belloc—"approaching 56 they pushed me into politics"; although I have always regarded my activities more as the business of government than of politics. Having served my term I can associate myself with what my noble friend Lord Windlesham said last week in the debate on the Address about the joys of freedom from office, and at the same time I can sympathise with the noble Lord, Lord Hughes, who has now left us, on now being subjected to the restraints of office instead of having the freedom which he exercised in a most friendly and fair manner when he sat on this side.

I think that I can express my joy at my freedom even more than some of my colleagues who, I am quite certain, will be finding themselves before very long—views on how long may differ—back in office because, as I have made to clear to them with much regret, and as I think I should make clear to all of your Lordships, I am not a candidate for a further spell of ministerial office, for, I believe, much the same reasons that the noble Lord, Lord Shackleton, was unable to take a place on the Front Bench opposite, to the regret of all of us. One can break off an existing career once for the purpose of taking office, but it is quite unfair to do it more than once and then expect to be welcomed back into the business world.

I can support wholeheartedly everything that my noble friend Lord Erroll said in opening the debate, which was most timely on the day after the introduction of the Budget. I want to comment on one aspect only of his speech, and that is the vital importance of giving encouragement to the development of industry and commerce in the regions, particularly in Scotland. I am glad that the noble Lord, Lord Beswick, mentioned this point a few minutes ago and told us that a new Industry Bill will be introduced. Naturally he was not able to tell us very much about it, but we shall look forward with great interest to its proposals. I have never regarded the regions—I know that we do not like Scotland being called a "region", but generically I think we must call it that—as a liability to the country. I regard them as an asset, because they have space for development, there are people to assist in the development—we still have a higher figure of unemployment than we should like; and I must apologise to noble Lords opposite for the fact that I have temporarily increased the figure in Scotland by one—and we have resources of skills. So that the regions are a real asset, provided that they are given the necessary encouragement.

I was sad that nothing in the Budget speech appeared to offer specific encouragement to industrial investment which is so badly needed, particularly in the regions. As the noble Baroness, Lady Seear, said, industry is burdened with higher corporation tax, and with increased costs for fuel, power, transport, posts, telephones and national insurance contributions. Almost the only compensation that one could see in the Budget was the promise that the regional employment premium would not yet be withdrawn. I should make it clear that even when we were in power there was no question of withdrawing it immediately, and plans were well advanced for a phased withdrawal of it. But in the present circumstances I think it is wise that it should be continued and, indeed, I think that many companies, particularly in the regions, would find themselves in severe financial difficulty if it were not.

There was one other possible burden in the speech which struck me and about which, perhaps, the noble Lord who is to wind up for the Government, may be able to enlighten us. It may be my fault for not studying the speech sufficiently closely, but in the passage about the disallowance of overdraft interest for tax, mention was made that whereas previously it had been allowed for qualifying purposes, there were loopholes and it was too easily got around, and that in future it would apply only to loans for particular purposes. I should point out to your Lordships that, particularly in Scotland, it is the normal practice of industries to finance themselves through fluctuating overdrafts rather than through fixed loans. My Lords, I think that we should like to have an assurance that this disallowance of overdraft interest will not apply to overdrafts genuinely incurred for the purposes of businesses of all kinds.

My Lords, before the recent upheavals from the fuel crisis and the miners' troubles in the winter, I believe that industry in Scotland, and many other regions, was probably better poised for a real breakthrough than it had been for many years. There were all the signs: unemployment had been coming down continuously for about eighteen to twenty months, until those sudden winter events; unfilled vacancies had been rising and there were indeed shortages of labour in individual places and categories. I think that we were all set for a big advance. I believe that once the present immediate difficulties are removed that advance can be resumed.

There are many causes. First and foremost are the very strenuous efforts made by industrialists in Scotland and others interested in the development of industry there, to achieve this. One must attribute some of the reasons to the impact of North Sea oil, and, my Lords, that is another subject on which I would rather not touch to-day because we shall undoubtedly have another opportunity before long to concentrate on it, although I must take the opportunity of congratulating the noble Lord, Lord Balogh, on turning from poacher to gamekeeper: we shall watch his performance in the new role with intense interest. I hope that, whatever new arrangements are made for handling North Sea oil, those responsible, in whichever Ministries, will take note of what I think is the extremely effective team that has been built up within the Scottish Office for handling oil matters, There is a considerable amount of expertise, knowledge and understanding in that office of the impact of North Sea oil, in its broadest sense and I hope that that will continue to be made full use of in whatever way the new Administration evolves.

The opportunities exist for maintaining this impetus. I am glad to hear from friends in recent days that the prospects for the capital goods industry in Scotland are basically good and that on the whole order books are good if they can deliver the goods, and we must help them to keep this up. That is why I think the maintenance of an effective regional policy is so immensely important. I was glad to hear the noble Lord say that they intended to develop these policies in new ways. I hope that that is so and that it does not mean a wholesale uprooting and change because in the past one of the difficulties with which industry has been faced has been the frequency of change in the forms of inducement and encouragement within the regions. This is where consistency and continuity are so important.

My Lords, I believe that the measures introduced in our Industry Act almost two years ago have been for the better. One of the most important factors was that for the first time there was a genuine measure of devolution of their administration to the regions. Certainly my own experience has been that this has worked extremely well in Scotland. It has worked well because we have had an admirable Scottish Industrial Development Board made up of industrialists, bankers and all sorts of people who have given a great deal of time and trouble to handling the cases, and because we have been fortunate in having behind them (if I am allowed to say this) an extremely effective administration of the Department of Trade and Industry in its Glasgow office. I hope, therefore, that changes will be a development of policy rather than a wholesale rooting up and renewal.

If I could carry that to a more particular line, I should like to say something about the future of the steel industry in Scotland because this is one of our basic industries. Unlike other parts of the country, which are mainly related to one specific form of steel production according to region, we have in Scotland almost a microcosm of the steel industry, with a variety of products, which is vitally important to us in terms of employment and in the supply of basic materials for our engineering industry.

My Lords, as we all know, the engineering industry has suffered greatly, particularly in its investment plans, from political uncertainties for many years past. During 1972, as your Lordships will remember, there was a very thoroughgoing review of its investment plans between itself and the Government, and eventually, at the end of 1972, its forward plans for the next steel generation—if you can call it that—were agreed and publicised. While at the time I know that there was a good deal of concern at the number of closures and the reduction in the total numbers to be employed in the industry, particularly so within Wales, more than in Scotland, there was a general realisation that if the steel industry was to be competitive it simply had to trim and modernise itself and that a smaller industry with greater production would give much greater job security to those continuing to be employed in it.

My Lords, at the end of the day I believe that Scotland came remarkably well out of those plans, rather better than at one time it looked like doing. I was a little concerned, therefore, to see that Mr. Wedgwood Benn in, I think, the interview previously referred to, had talked about reviewing closures with the British Steel Corporation and indicating that possibly there might be another review. I beseech the Government not to have another thoroughgoing review of the steel industry's investment plans because I believe, certainly in Scotland, that we have broad acceptance of what was planned at all levels, including the trade unions, who have been very co-operative.

What is more, I know from my own visits within the last few months that we have a good and enthusiastic management in the plants and good leadership on the plant floors, too. The worst possible thing would be to introduce fresh elements of uncertainty at this time when there is general agreement about those plans. We have gone a long way in plans for finding alternative employment for those who inevitably would lose it in the steel industry and, under me, we had working in the Scottish Office a reconstruction team bringing together the steel industry, the trade unions and the local authorities to see what could be done. With their help we had already earmarked surplus British Steel Corporation land in the Clyde Valley for the possible creation of a major new industrial estate, extremely favourably sited, which I believe would be a great attraction to new industries. I sincerely hope that that scheme will be allowed to be continued. We also had plans for the Glengarnock area in Ayrshire. We had plans for giving a great facelift to this area, with the rundown of the steel industry in it. I hope that these will be allowed to continue.

My Lords, I think the great thing here, and the final point I would make, is: let us not root everything up for the sake of new theories and new ideas, however anxious new Ministers may be to leave their particular imprint on these new fields. Industry cannot survive if its roots are going to be pulled up and inspected every two or three years. Investment plans are essentially long term. It may often be anything from five to ten years, or in some cases even 15 years, from the genesis of the idea to when the investment is completed and the finished product comes off. Therefore, I make a plea for continuity and for support and encouragement.

I am bound to say that this first, interim Budget does not contain anything much that I can see by way of encouragement. I only hope that the second, autumnal Budget, if it is introduced in due course (I say "if it is introduced" because I noticed that the Chancellor took the precaution of saying, I think, "If the House and the country agree", and I think that was a wise precaution to take), will not be concerned solely with the discomfiture and discouragement of certain sections—those who, while they may be considered to be enemies of society, in many cases are simply people who are using the normal instincts of working hard, of enterprise and of wishing to see some material results from their efforts in leading industry and commerce, and if I may say so, the not totally reprehensible motive of passing on some of those results to their heirs and successors—but will be very much concerned with the encouragement of our industry and commerce, and of those who carry the very heavy burdens of its management.

4.42 p.m.

LORD MAIS

My Lords, I am grateful to the noble Lord, Lord Erroll of Hale, for giving us the opportunity to discuss this matter at such an opportune moment. On the other hand, I cannot help feeling that, opportune though the debate may be, it is a little ironical to ask this Government their intentions so early in their tenure of office, bearing in mind the general state of industry when we took over only a matter of three weeks ago—a state which I believe was largely produced as a result of the Industrial Relations Act and the inflexible manner in which it was applied. I think there were few of us in your Lordships' House when that Bill passed this way some time ago who did not go away with some concern as to the final outcome. I mention this merely because I believe that before one can consider what is required in order to give full encouragement to industry and commerce it is necessary to give some thought to some of the problems which are facing industry at the moment.

What industry and commerce require, what is in fact a prerequisite to their success, is not only encouragement but confidence. Confidence in industry and commerce has been badly shaken over the last four months. By that I do not mean only in the boardrooms, but on the factory floor and the shop floor as well. Without confidence industry will not attract the money it requires to operate, whether that money comes from shareholders, from the banks or from the finance houses. Without confidence industry will not be prepared to invest money in research and development, in the exploration of markets at home and overseas or in the expansion and improved efficiency of their companies. Without confidence they will hesitate to recruit labour. They will find it difficult to retain that labour, or to satisfy it. But, principally, without confidence industry will inevitably slow down. It has already been slowed down. To draw a parallel, an aircraft requires a certain amount of speed in order to stay in flight. Industry requires confidence and the facilities to enable it to operate and to expand; otherwise it also loses flying speed, and sooner or later, as the aircraft will crash, so will industry.

The noble Lord, Lord Erroll of Hale, referred to the rather vexed word "profits", and perhaps I may be allowed to do the same. My Lords, all industry and commerce must ultimately depend on the profit element, for without profits and a good profit record you cannot attract adequate funds into your business in order to operate efficiently. Without profit you cannot take steps which are necessary to expand your business or your business activities. Without profit there is not very much you can do to improve the conditions of those who work for you; and it is very little use anybody submitting a wage claim to a firm that is losing money.

I remember—and I shall never forget—what happened back in the late 1940s or early 1950s, when I was engineering director of a company of which I later became chairman and which was building an experimental atomic plant. It was so experimental that those designing it had not much idea what was going to happen at the end, and certainly those of us who, were building it were even less well informed. It was very much a hand-to-mouth existence, with the result that we were negotiating, or were trying to negotiate, how we were to be paid for it as we went along; and, as so often happens in these cases, it was not a very satisfactory business. One day one of those stalwarts from the trade unions, the late Sir Luke Fawcett, came to see me. His first question was, "Are you making a profit?" I told him I was not, and that in fact I was losing very heavily. He pondered for a moment and then, being the man he was, he said, "You know, I do not like companies which do not make profits because it is not the slightest good my submitting to you a claim on behalf of those I represent if you have no money to pay it." What did he do? He then threw his influence in on our side in order to get negotiations finalised rather quickly, with the result that in a few weeks we were happy, and so were the trade unions. I refer to that only for two reasons: first, to show that profit is necessary, and, secondly, to show what can be achieved if there is a good rapport between the senior management and the senior officials of a trade union. We should never have got that matter settled had it not been for their support.

It is necessary, my Lords, that we stop thinking of the word "profit" as a dirty word. Without profit industry cannot survive, and there is little hope of happy industrial relations unless we can achieve it. The real problem is that profit in itself will always be suspect. What we have to be careful about is the amount of that profit and the use to which it is put. Therefore it is essential that whatever Government are in power they must give every possible encouragement to industry and commerce. What I find difficult to understand at times is why anyone should expect or anticipate that the present Government, and those of us who sit on this side of the House, are any less alive to this fact than the previous Government and those who sit on the other side. If a firm falls upon bad times, then it is often the case that it is the lower-income groups and the men on the shop floor who feel the bite first. Therefore, so far as this Government are concerned, we have certainly as much, if not perhaps a little more, interest in ensuring that industry and commerce are profitable and that they are given every possible encouragement.

There was a time when British goods were admired throughout the world for their quality and for our delivery. Many of your Lordships may have travelled around the world as much as I have during the last fifteen months, and I regret to say that our quality is now in many cases suspect, and our delivery dates deplorable. My noble friend Lord Beswick referred to the closing gap between our exports and imports of manufactured goods. I believe that our problem is due largely to two things. We all know that we have a problem with regard to essential materials, but, secondly, I believe that one of our principal problems is the present state of industrial relations. In 40 years in industry I do not remember when industrial relations have been quite so bad as they are or have been during the past twelve months. The Industrial Relations Act created a great deal of ill-will between the operatives—or employees—and management. I should be the last to advocate a free-for-all, but we are at this moment in a serious economic state. We have rising prices, in fact we have an escalation of prices in almost every direction. What is necessary—and it is a matter of great urgency—is that we should have a wages and incomes policy which is seen to be fair, and which we hope will be acceptable to all concerned, if not in perpetuity at least for the period of this crisis, or for a limited period. Personally, I hope that it will be in perpetuity. But if that is to be so it must be a flexible arrangement and one that is kept constantly under review.

I have already referred to the shortage and rising costs of raw materials. We sometimes overlook the fact that almost all our troubles, or a very large proportion of our troubles to-day, are entirely due to this factor rather than to internal ones. I do not imagine for a moment that it is possible for us to have any form of import control, nor may it be necessary in fact, but I should like to see consideration given to directing that limited supply of raw materials to those industries which are most closely connected with export. If that means cutting back on the output in less important fields, then so be it.

There are of course a number of rather ridiculous situations existing at the moment. They are small in comparison with the whole but they make one wonder what is happening. Three or four times in recent months we have had projects held up because of shortage of steel, principally reinforcing steel and light sections, and we have had to buy from abroad. You may think it ridiculous, but it is true, that my company had a delivery, in fact we had several deliveries, that arrived on the site after having left a works not more than 40 miles away eight days before. They had crossed the Channel and had been delivered back on the same lorry. The only difference was that the delivery had been exported at the control price for steel and bought back at £50 a ton more. For every ton of steel that goes that way we have a £50 per ton deficit on our export/import. Surely it is not beyond the wit of Government and industry to see that that does not happen.

My Lords, I ask you also to consider whether there is as close a relationship as there should be between very senior union officials and the senior people—by that I mean the chairman and managing director level of companies. I started my life a good many years ago on the equivalent of the shop floor as a young engineer working on engineering sites, and I had a very close relationship then with the junior union officials with whom I had to do business. I kept that relationship for quite a while, but as I moved up the ladder and by the time I reached the Chair I found that that relationship had gradually been whittled away and did not exist to the same extent. That is a matter which requires careful consideration, and I sincerely hope that Her Majesty's Government will see what they can do about it. It is one thing to have a close relationship between the trade unions as a whole and industry as a whole, but that is not at the bottom of things. Where the trouble starts is in the individual company and on the shop floor, and unless management of companies and senior union officials with whom they deal are not only in close contact but also, if you like, have some understanding of each other's problems, then you are in for serious trouble.

Undoubtedly industry is going to be hit with the additional taxation, although perhaps they may consider that it is not so bad as they were expecting. But I would hope that the Government would give very serious consideration to some relief on taxation as soon as the economic situation improves. In the meanwhile, I sincerely hope that they will also consider whether relief cannot be improved, or allowances cannot be improved, in order to encourage firms to invest in new machines and new plant, new factories, to spend money on research and development and also on looking into markets at home and overseas. Let us face it, searching out new markets is an expensive business. If the Government could in some way give an indication that this matter will be considered, then I believe that it will go a long way towards restoring confidence in industry. Confidence is badly needed at the moment.

It has been said many times before, my Lords, that this country exports or dies. I am sure that the dying would be a very painful process and would last a long time. The lowering of our standard of living would be very painful. It is important to any Government—and I am sure this Government will appreciate this probably more than any other—that industry and commerce must be encouraged. They must be supported. What they need at the moment, probably more than anything else, is to be given some indication as to the future. I should very much like to see discussions open up as a matter of urgency between the Government and individual industries. I think it was the noble Lord, Lord Erroll of Hale, who said that it was better to talk to the industries individually than to the large associations because each industry has its particular problems. I strongly support that view. It is very nice to have words of encouragement but they do not solve difficulties. Industry at the moment lacks confidence. That lack of confidence, with all respect, can hardly be laid at the door of this Government. We, I regret to say, to a large extent inherited it.

My Lords, this is a very important debate. Once again may I thank the noble Lord, Lord Erroll of Hale, for giving us the opportunity to spend some time on it this afternoon. I would thank noble Lords for listening to me with patience. I have had a constant eye on that clock above me and I hope I have not transgressed. I have in fact gone only one minute beyond the time that I set myself.

4.59 p.m.

LORD KINGS NORTON

My Lords, I do not intend to follow noble Lords down any of the paths which they have trodden except to follow a rather narrow path on which the noble Lord, Lord Erroll of Hale, put no more than a somewhat critical foot, the path of mergers and takeovers.

The merging and taking over of companies is part of our pattern of industrial and commercial development, and short of a revolutionary change in our system it is likely to continue. It is one of the means we use for producing more efficient units and for creating enterprises big enough to engage in the major projects which are more and more characteristic, as time goes on, of our technological and industrial progress.

In this country we have refined the processes of merger and takeover in such a way that they are reasonably controlled in the national interest, and I think it is important that the means we have developed should continue to be refined and improved. While, if they are, industrial and commercial concerns will, I suppose, not feel any particular measure of encouragement—and encouragement is the nub of the Motion which the noble Lord, Lord Erroll, has moved to-day—there is little doubt that if the processes at present applicable to our commerce and industry are depreciated they will soon feel a positive discouragement; and there is a serious possibility of this happening.

Until recently, the Government Department concerned was the D.T.I., and the work it did will presumably in future be done by one of the Departments now formed out of it. I believe the duty will fall to the Department of Mrs. Shirley Williams, but perhaps the noble Lord, Lord Beswick, will confirm this when he comes to wind up. Formerly, when a merger or takeover was intended the D.T.I. took two or three weeks to decide whether it should be referred to the Monopolies Commission. If it were not to be, the arrangements for the merger terms, or the bid, went ahead. If it had to be referred, then the Monopolies Commission took two or three months perhaps—in complex cases sometimes a little longer—to decide whether or not to allow the deal to proceed. In any case, by the Fair Trading Act 1973, they were not allowed to take more than six months; and when the deal did go ahead the takeover panel kept a critical eye on the proceedings.

Noble Lords who read the financial Press in some detail will be aware that on June 19 last year G.K.N. notified the Commission of their intention to bid for the steel stockist company, Miles Druce. My Lords, that was nine months ago! The proposed takeover was referred to the European Court at Luxembourg. On March 20, the court gave a ruling and the decision was such that the matter is far from finished. There is more argument to come. In the Financial Times yesterday a Miles Druce shareholder was reported as prophesying another 12 months' jousting in the European courts.

Some of your Lordships may wonder why the possible merging of two British companies is a matter for a European court. It is because when we acceded to the Treaty of Rome we also acceded to the Treaty of Paris, which deals with the European Coal and Steel Community; and the intention to bring together two companies in the steel business, even if both are of the same nationality, is the business of the Community. I do not intend to argue whether or not that is a good thing; nor do I intend to argue the merits of the G.K.N. bid for Miles Druce. I do, however, intend to argue that the delay in reaching a conclusion is intolerable: it is expensive for those involved and is engaging talents which would be better employed in developing the businesses concerned.

There is yet a further reason for disquiet, my Lords. The Commission in Brussels has in draft a regulation which, if it passed the Council of Ministers, would extend the powers which Brussels and Luxembourg have at present over mergers and takeovers in the field of coal and steel over a vastly greater industrial and commercial field, so that an intended merger or takeover involving two important British companies would be liable to intolerable delays of the kind exemplified in the G.K.N./Miles Druce affair. This, I submit, is an appalling prospect.

The Motion which is before us to-day urges the Government to encourage British industry and commerce. As I said, I am assuming that one form of encouragement is the prevention of positive discouragement. Most certainly, if the development of mergers and takeovers here were to be further frustrated in the way I have indicated, very great discouragement and demoralisation indeed would result.

While I feel strongly about the importation of slow-motion European Community methods into industrial affairs here, I do see that there is some justification for the sort of control which we have got used to here, in the shape of the D.T.I. Monopolies Commission and takeover panel system, being applied when mergers across European frontiers are proposed. So I hope that the Foreign Secretary will include in his intended renegotiating package two proposals. One would be that mergers and takeovers in a country are left to the legal and financial processes of that country, and the other would be that the European Community processes for controlling international mergers and takeovers are modelled on our own.

I have stated those objectives in very simple terms. Inevitably, I know well that any agreement within the Community to improve the situation which I have described, and to avoid the situation which I fear, would be in more complex terms. But I am convinced that steps should be taken in the direction I have indicated, and I take some encouragement from the fact that the matter I have raised with your Lordships must have been one of the subjects discussed yesterday when M. Borschette and Dr. Schlieder from the Commission in Brussels visited the C.B.I. I hope that further encouragement will be forthcoming when the noble Lord, Lord Beswick, winds up.

I sincerely hope that noble Lords will not regard the matter I have raised as being wide of the Motion put forward by the noble Lord, Lord Erroll. I believe that industrial progress, here and in the Nine, depends on the collaboration of scientific, technological and industrial organisations, and that international industrial mergers will prove to be one of the most important means of knitting together the interests of the Nine. Procedures which stand in the way of this concentration of interests and of industrial efficiency, should, I suggest, be amended.

5.7 p.m.

LORD BERNSTEIN

My Lords, I too, must apologise to your Lordships for the fact that I shall have to leave shortly, because I am involved in a lecture at the Guildhall; but I shall read with interest later the points which are raised.

Having read about your Lordships' House in the colour supplement of the Observer last Sunday, I feel rather inhibited. I am not sure what class I fit into and what behaviour pattern I should adopt to-day. I am not one of the "young people" of whom the noble Lord, Lord Beswick, spoke; I am a Back-Bencher. But how to start? I suppose I could say "this is an argument which would not apply to your Lordships"; or I could say "with the greatest respect". The Observer said Members had to have politeness around them.

I have no complaint about the politeness I have received in your Lordships' House. I have met courtesy on all sides and I am delighted to be here. But politeness does not include avoiding the truth. It is generally and regretfully accepted that what counts is the impression of the truth and not the truth itself. I do not quite know from the point of view of a Back-Bencher where this debate fits into the responsibilities of your Lordships' House. I will try to speak in terms of the moderation which is now so fashionable, although there was not much moderation shown by the noble Lord, Lord Erroll.

The noble Lord, Lord Erroll of Hale, did not approach the debate in a moderate way. His approach seemed to me, talking about the hardening of the arteries—I have always been afraid of hardening my social arteries because that could be a serious matter—one of saying that the Government were on probation, had a rigid point of view, knew nothing about business and that a profit to them was an emotional word. I do not agree with any of that. The people I know in the Government and the Labour Party acknowledge that profits from business, honourably made and properly spent and used for development, are acceptable and worthy of respect.

The noble Lord, Lord Erroll of Hale, spoke as if everything in British industry and commerce was running on a planned level until about three weeks ago, and then it all changed when the Labour Government took office. The noble Lord did not give credit to the late Conservative Government for the catastrophic results achieved by them under their policies. No credit was given to the Labour Government for what they did in the two periods when they were in Office. The noble Lord, Lord Mais, made the points that I wanted to put to your Lordships.

I again ask, with respect: where does this debate fit in? The word "urgent" made me think of the debates on economic policies and economic affairs that have taken place in your Lordships' House over the past two or three years, when warnings of the storms to come were given by my noble friends Lord Diamond, Lord Beswick and Lord Balogh, to mention but a few. They pointed out that British industry could make no real progress under the Conservative Government in formulating an overall policy to deal with the problems. Who now remembers the lame ducks? Nobody on the other side mentioned them to-day. Who remembers the problems of the Upper Clyde Shipping Company? Who remembers how that matter was dealt with? A Statement was brought from the other place and read to your Lordships; it stated that the men in the shipyards were to be fired immediately. Three "Wise Men" issued a report which was not debated. It was accepted as urgent. The closedown of a great British industry of importance was a matter for urgent action. Alas for history! one of the "Wise Men" headed a company which lost £1 million in the same year. Some of the men in the shipyard, fortunately, doubted the wisdom of the three "Wise Men" and took action, and the shipyard is still operating.

Should this debate have been part of the debate that followed the Queen's Speech? Was it timed to follow yesterday's Budget? When did the noble Lord, Lord Erroll, decide that there was need for urgent policies to give encouragement to British industry? Was it three weeks ago, when a new Government was formed? The urgent need of policies to give encouragement has been suggested for years. The noble Lord, Lord Mais, said that industry requires encourage- ment. Industry has not had encouragement for 3½ years. It has certainly not had encouragement over the past few months. It was not only industry that decided that the Conservative Government did not have a policy; it was also the voters who decided by an overwhelming vote that they did not agree their policies.

The last Government made fatal mistakes; they also forgot Disraeli, and even Baldwin. Baldwin told everybody never to get involved with the Vatican; never to start a fight with the Treasury; and never to take on the miners. The Conservative Party should remember that; hence the votes against them. They inherited "power" from the Labour Government with every opportunity to go forward to greater success. The balance of payments were right. Industry was doing very well.

I remember the Industrial Relations Act going through this House. I had to stay up many nights because it was being fought tooth and nail by the Conservative Party here. I cannot remember any industrialist of any quality on this side of the House ever speaking on behalf of the Act. It is true that when the Division bells rang they crowded out of the bars, the Library, and so on, and swept those of us on the Opposition Benches off our feet, and they had an overwhelming majority. I remember people on the Cross-Benches warning the Government that they could not settle industrial relations by legal methods, but the Government took no notice. I remember one night three Members on the Cross-Benches, all lawyers, urging the Government to support an Amendment that they could understand if troubles arose and the clause came before them, but they did not succeed.

I am not worried about the future of industry as perhaps are some industrialists opposite. I do not think that the noble Lord, Lord Mais, is very worried, either. A few days ago the Financial Tunes reported that the London Chamber of Commerce and Industry said there existed a general confidence and that order books were much healthier than anticipated. This was after the miners' strike had been settled.

The noble Lord, Lord Polwarth, mentioned that the rates of interest affecting industry would not be chargeable. As I read the Chancellor's speech—and perhaps my noble friend Lord Beswick will confirm this—industry which uses borrowed money for the development of their businesses will be allowed to set normal interest charges against their profits. What the Budget has done (I always understood that we were not allowed to speak about the Budget, but it seems to be accepted that we can) is not to grant the benefits of deducting interest from income by people who use that money, as they have done for some years, as speculators in stocks, shares and commodities.

The Conservative Government, about 18 months before the last mini-Budget, decided that hire-purchase goods and rental goods should be freed from the controls that then existed. Three of the industries involved urged the Government to do this over a period of some months so that factories and distributive organisations could have stocks ready to deal with the problem. But they did it overnight. Good politics! Eighteen months later the minimum period for rentals and hire-purchase was raised to 42 weeks, again upsetting the plans of those who planned work in the factories and distribution. The present Government may not be in an invincible position, but they have in three weeks shown that they intend to carry out effective policies of meeting the challenges. I believe that their programme will appeal to the broad spectrum of sensible people in British industry and commerce. It may not appeal to the commodity speculators, the Stock Exchange and other speculators, but it will appeal to those proud to be a part of British industry and commerce, especially those who have built up their own businesses.

5.19 p.m.

LORD ORR-EWING

My Lords, I am glad that I am following the noble Lord, Lord Bernstein, because I am one of those people who pioneered Independent Television through the House of Commons, against tremendous Labour Opposition. I reflect that if he had not had the chance, through my actions, to build up his business with such great success, he might not be sitting on the Benches opposite, and we might not have had his wonderful wisdom—

LORD BERNSTEIN

My Lords, television is only one part of my business interests.

LORD ORR-EWING

My Lords, the noble Lord would be the first to say that it is a profitable part—but perhaps he is saying that it is not profitable. I sympathise with him if his Independent Television company has not been profitable over the years. I did not invest in it because I felt, having played a part in the creation of Independent Television, that I should not invest in an Independent Television company.

We are all grateful to the noble Lord, Lord Erroll of Hale, for raising a matter of considerable interest. As the noble Lord, Lord Mais, has made clear, wherever we sit in this House industrial efficiency must be of concern to us. We are equally grateful to the noble Lord, Lord Beswick, in opening when, talking of the policy of this Government, he said unite clearly that "British industry is to be encouraged." I took down those words.

My Lords, I want to say something quite shortly on three points: first, on the incentives for British industry and the need for investment; secondly, on the social contract; and thirdly, a word on one of the most important engineering enterprises which our country has ever undertaken from the point of view of prestige, and I think eventually earnings, and that is Concorde. I mention the last only because I believe the Government are still thinking about the future of this aircraft.

I think everyone will agree that over the years the United Kingdom profits from our manufacturing companies have not really been sufficient to allow for adequate reinvestment, modernisation and our resultant competition throughout the world. There is one fact which I have noticed during my Parliamentary life and that is that if there is a turndown in the profits of our industrial companies, almost inevitably about one year later there is a turndown in investment and after two years an increase in unemployment. This happened after the Selwyn Lloyd freeze of 1961, when we had unemployment in 1963. It happened when profit turned down in the 1964–66 period. More recently it has happened in the last five years. In 1968 the financial surplus of our industrial companies was just positive. In 1969 there was a £500 million loss. In 1970, there was a one billion pound loss. Incidentally, it is now common in this country to accept the American definition of "billion", and I refer to one thousand million. When I was in school a billion was a million million in this country, and a thousand million in the United States. I am using the U.S.A. term which seems to have become universal. By 1972 that loss had turned into a profit of £500 million. In 1973 we are told profits were buoyant, although I think that those profits may be rather false because there was considerable wage inflation towards the end. Prices were rigidly controlled, raw materials certainly had very high import prices—they had increased by 100 per cent., or 400 per cent. in the case of oil.

I cannot help believing that if we had inflationary accounting in our companies it would have given a rather different picture. I know the present Government have said that they were going to carry on the previous Government's intention of looking at inflation accounting and seeing whether accounting should not, on the recommendation of the professional institutions, go over to this method as giving a more realistic picture of the position and profits of our companies. Certainly the industrial costs in recent months, and last year, have been inflated by wage and salary rises and by the raw material price increases; and have been somewhat disrupted by late deliveries of sub-contractors and of components. It is true to say that two years after the last turndown in profits, unemployment began. If we are going to have a turndown of profits in the present climate, then I think we are going to have unemployment rising in this country at a quite serious pace.

I have been in touch with the Central Statistical Office because I wanted to get some idea of the increase in profits as compared with the increase in wages and salaries. I find that in the 1962–72 period wages and salaries in manufacturing industries went up from just under £6,000 million to nearly £12,000 million. In fact, it was just a 106 per cent. increase. If you take the increase in wages and salaries, the 15 per cent. increase on that 1972 figure—because the 1973 figure is not available—then it has gone from £12,000 million to nearly £13,500 million. If one looks at the profits for the same period one will find that they have increased in the ten years; that they are up by £2,000 million while salaries and wages are up by £6,000 million. So there is positively a lesser increase in both percentage and in real terms in profits. One has only to look at company records (which now give 10 years summaries fairly universally) to see how small the increase in dividends has been over that same period. A typical increase one finds is 6 per cent to 6¼ per cent. or 6.20 per cent., while profits were controlled; then one has perhaps an increase to 7 per cent. or 8 per cent. of dividend paid. So, as compared with our competitor countries we are not making big enough profits, we are not ploughing, back enough in investment. These matters have to be attended to.

I listened to the new Chancellor's speech in another place yesterday, and he said towards the end (OFFICIAL REPORT, col. 327) that he hoped his Budget would foster the confidence necessary for industrial investment. My Lords, I hope he is right. But I cannot help feeling that some of the measures in that Budget are going to do the reverse. I will enumerate some. Corporation tax is to be increased from what had been proposed at 50 per cent. to 52 per cent. Moreover, industrial companies will have to pay half their corporation tax in advance. Secondly, industrial companies have to pay an increase in the stamp of 44p a week for every person they employ. This may not sound much, my Lords, but for a company of only 5,000 people, this means another £125,000 a year in labour costs.

Thirdly, there is to be a swingeing increase—I do not in any way object to this because I think you have to have reality in your nationalised industries accounts—in electricity charges of 30 per cent. This will fall as a charge on British industry. Steel is to go up yet again, this time by 25 per cent., and industrial coal is to go up by 48 per cent. That is a reflection, of course, on the miners' settlement. Above all, in addition to other taxes, we are to pay an extra tax of 5p per gallon on petrol. One would have thought that petrol, which is such an important factor in distribution costs for industry, had gone up enough without attracting an extra tax, but it is to go up by another 5p.

So prices are to be held down and profits squeezed. That was the policy of Her Majesty's Government, and it was stated and restated yesterday. In a question of confidence it tends to be a little uncertain for those of us who have to consider whether we are to invest in the future that there is to be yet another Budget in six months' or less time. We do not know whether that is to be further deflationary or inflationary. At the same time, I think it is sad that there are to be reduced incentives; in particular, that extra taxes are to be levied, as my noble friend Lord Erroll of Hale said, on those people who are so vitaly important in the management and leadership of industry. I refer to the skilled men, the foremen, the chargehands and the junior managers. These are very important if we are to meet our high standard of product punctually, and to give the deliveries our export customers expect.

Lastly (and I thought this was unnecessary because so much has been said during the Election campaign of the need to build bridges between management and the shop floor) all share incentive schemes, which reach down now to very junior management, are to be made null and void, and ruled out. So all these items, I submit, will be a drain on the cash resources and profit margins and must reduce investment. I reiterate that if investment is reduced, in the long term it must have repercussions on our competitive position and on our employment.

The noble Lord, Lord Mais, said in his speech that he wanted the maximum co-operation between trade unions and management, and he gave some illustrations of what could be done. The three-day week brought on by the miners' strike taught us, if anything, just what can be done in industry with co-operation at all levels. It really was wonderful to see what people did. The British are unique in this way: when they have a challenge of that kind they get down to solving problems and manage to turn out far more than anyone expects. I remember reading a C.B.I. statement saying that there was going to be a huge slash in industrial output. I remember the British Steel Corporation saying just before the Election that they expected only 50 per cent. of normal steel output. When the figures came out it was shown that steel output had in fact been cut by only 28 per cent. So almost in every way what happened in industry during the three-clay week period showed what cooperation can do.

I now come to the social contract—I see that the noble Lord, Lord Bernstein, has now unfortunately left us. On this question I am the first to say that I wish the Labour Government well. Every democratic nation that I have studied has some legal framework for its industrial relations. The previous Labour Government did their best to contrive some form of legal framework when they introduced In Place of Strife. They were pushed off this intention by the Left Wing and the trade union movement. I am sorry they were dissuaded. We in our turn made another effort. We took many of their clauses—about half of them, I think—and incorporated them in our Bill; and again that was a failure. Now we are to have a third effort by the Government, which was mentioned in their Manifesto—for greater clarification I carry a copy of it with me during this period of political life. We are to have a Social Contract.

But can we be sure that the contract will be honoured? I am sure that the wish to honour it is there, or can be there, so far as the T.U.C. are concerned. Certainly this Budget has given them all they have asked for, but are we now going to have the corollary? Are we going to have an acceptance, not just by the T.U.C. (because I am sure that that would probably be forthcoming) but by the unions under the T.U.C., the constituent members of the T.U.C.? Will they all honour this agreement? Will the A.U.E.W., which has about half of its National Committee of the extreme Left persuasion, or the N.U.M., which also has about half its National Executive Council on the extreme Left? Certainly the former of those two, under Mr. Hugh Scanlon, is already showing signs of restlessness to break out of the agreement and has threatened further bans on overtime working in the engineering industry. And if the agreement is honoured at that level, is it going to be honoured at district level; and if it is honoured at district level, is it going to be honoured at plant level? This is a tremendous problem and I admire the courage—because it is essential it should be so—of the Labour Government in taking it on. If the attempted solution is not successful, then I do not see how our nation is going to survive and remain competitive. If the present Government fail on this issue, I wonder whether we shall not have to await in a few years' time the formation of some National Government on an all-Party basis to tackle this desperately difficult problem.

For my third and last point I turn to Concorde. A statement was issued by the British Aircraft Corporation earlier to-day. It was sent to the Minister, Mr. Wedgwood Benn, and it says that the financial figures published in Hansard on Monday of last week do not line up with their estimates; in fact, they suggest that those figures are very pessimistic indeed. But even if those figures are taken, it is said that the cancellation of Concorde at this stage would cost £80 million. I am sure that this is too low an estimate. In the United States the S.S.T. was cancelled at a much earlier stage in its life—that was their supersonic transport and it had not reached a prototype stage—and that cost them not £80 million, which is our forecast for Concorde, but £290 million. When we look at the costs of the T.S.R.2 cancellation I think we realise that £80 million must be a gross underestimate. Have the claims of a thousand sub-contractors been taken into account? My company—and here I declare an interest; in my instance it is a small black box—and many engineering companies, many electronics companies, are concerned to furnish some supplies for Concorde. We are making small numbers off for the 16 aircraft under construction. Are we going to be compensated if all those products have to be thrown away? And what about the redundancy which will result?

The alternative, so we are told in the words of the Minister, is to go on to produce the 16 aircraft now under construction at a cost of £35 million extra, compared with cancellation. My Lords, it surely must be good business to go ahead with this venture. So many times in our industrial history since the war we have reached the very brink; we have carried out the research and development and produced a prototype. Then, somehow we lack the courage or the money, or the resolution or guts, and we drop it. Here we have an opportunity of sticking to something which is worth while. I would urge the Government, when they are considering this matter, as they have said they are going to reconsider it, not to be pushed off it by the United States. The United States aerospace industry is a highly competitive industry. They have a near monopoly of civil aircraft supply worldwide. They would like to have a supersonic transport, too. It has been published in a book, and confirmed by Mr. Julian Amery, that in the last case when a Labour Government came to power in 1964 they went to the United States and asked for favourable financial borrowing terms, and the United States reasonably said: "We do not really see why we should give you money to help finance competitive products to those we have on the stocks ourselves"—a perfectly arguable point. So as a result of that Concorde was written into the first White Paper which the Labour Government produced (I think it is more colloquially known as the Brown Paper because of its author's name) that this was a "prestige symbol" which should be cancelled. I would urge the Government on this occasion not to be persuaded by the United States into cancellation.

My Lords, a Rolls-Royce has become throughout the world, and remains, a symbol of British engineering perfection; and it is recognised as such. I believe that the Concorde can be a symbol, as it spans the oceans and arrives in the capitals of the world, of the vision of British engineering; a symbol of Anglo-French co-operation and of our ability, not only to conceive something which is first-rate, but to produce it, and to have the courage to do so. My Lords, I hope that the Government will carry on with Concorde.

5.38 p.m.

LORD BOWDEN

My Lords, after the rather gloomy forebodings of the noble Lord who has just sat down, I wonder whether the House would bear with me if I were to read a few remarks made by an eminent scientist whose name must be known to most of your Lordships. He said: We are entering now upon the most serious struggle for existence to which this country was ever committed. The latter years in this century will see us in an industrial war which is far more serious than the military wars which took place in the first part of the century. The situation is very grave. The scientist was Thomas Henry Huxley, and the date 1878. We have in fact been here before.

I am extremely grateful to the noble Lord, Lord Erroll of Hale, for allowing us an opportunity to discuss these matters. And I want, with the permission of the House, to fly a rather curious kite. I want to persuade the Government that one of the most important tasks they could perform would be to send a mission to Brazil to discover how the accounts are cast there and how their Treasury operates its tax rules. Your Lordships may think this an extraordinary suggestion to make, but the reason is simple, and it is this. We have been thinking for many years that inflation is a curious anomaly which we have to struggle against and that if we wait long enough it will perhaps go away. We have never come properly to terms with the task of handling implications. The Brazilians, for several years now, have taken it for granted that inflation is here to stay. It has fluctuated in Brazil from 100 per cent. in one awful year to 50 per cent. Last year it was down to about 18 per cent., and it is still falling—in fact, this year the rate may well be lower than our own. The point I am making is that they have come to terms with it and they have devised a fiscal system which allows them to cope with it; we pretend it is not really here, that it is not part of our system and we ought to try to forget it, so we are suffering to an alarming extent from its consequences.

I should like to make a few observations which will I hope persuade your Lordships that this apparently extraordinary suggestion is in fact entirely reasonable. May I therefore make a few points about the consequences of inflation which have been noticeable in the last two years? It is currently and commonly said that the primary cause of inflation is the rise in wages and the rise in prices. I believe that this is only partially true, and I believe that what began as a defence against inflation has become a primary cause of it. I refer first of all to the extraordinary inflation in the price of houses. I will simply say that in the year which ended last December an ordinary Englishman living in his house earned more by doing so than he did by taking home his taxed income. To put the matter another way, the inflation in the book value of houses in this country—there are about 18 million of them—was in round figures about as great as the gross domestic product in its entirety. When one discusses this subject people say, "But of course people living in their houses are no better off." That is quite true. But when one is dealing with sums which are comparable to the nominal value of the gross domestic product these arguments cease to be tenable. As a result of inflation and our hedging against inflation we have in fact succeeded in what I can only call the ultimate economic miracle. We now find it possible to buy German motor cars, German machine tools, and anything else you care to name, and pay for them by increasing the price of houses in Richmond. This, as an economic enterprise, is not likely to be sustained for long.

I think we are, and have been for the last 20 years or more, engaging in a process fundamentally similar to that which created the enormous and feverish prosperity of the United States in the twenties. Your Lordships will remember that in those days America became enormously prosperous by inflating the price of common stock. People expected to buy and sell and make a profit continuously, and they thought that they had achieved the secret of universal inevitable prosperity. Furthermore, they developed a special system for doing it—buying and selling stock on margins and subsequently using the stock which had been bought as security for another loan.

We have achieved the same kind of feverish prosperity by inflating the price of practically everything except equities. By this I mean everything from houses to old wine, old masters—anything you care to name. And in my own village I find that almost every little shop has gone out of business and been replaced by someone selling either antiques or real estate. It is here that the money is being made. It is being made because we have never really come to terms with this process of inflation, which now dominates everything we do.

I find in my university, for example, that very few students want to come to the university to study those subjects which fit them for a place in productive industry. They will not study mechanical engineering; they know perfectly well that the jobs to be had in mechanical engineering are few and not very well paid. Chemical engineering has suffered even worse. We used to have in my university the largest department of chemical engineering in Europe. We used to admit 110 students every year: last year we admitted 37. Every major undergraduate university department of chemistry in this country is half empty to-day. The reason is simple: everyone realises that chemists do not do as well as property speculators. If I go to schools, as I frequently do to talk to headmasters they say. "Our students know that they do better outside universities and away from the conventional professions than they do in them. If they are ambitious they go into totally non-productive enterprises which happen to make money".

This, I think, is due in large measure to our fiscal system and our accounting system and it could be changed by the Chancellor of the Exchequer without, I believe, the intervention of Parliament simply by changing the conventions upon which people have to cast their accounts. May I take one particular example. One of my own staff did an analysis of the effect of installing a piece of substantial machine tool in one factory six years ago. The accounts which the firm produced this year show a 30 per cent. return on the capital invested. On the other hand, if they allowed properly inflated cost for the replacement of the tool when it wears out it is clear that the real profit made was zero. It is upon the 30 per cent. that taxes are levied it is, furthermore, upon the 30 per cent. that profits are paid. But the 30 per cent. is totally unreal.

There was a meeting in my office a month ago of many of the most eminent members of the machine tool trade. The machine tool trade is a very vital industry which of late has suffered from evil times. I asked them all what they paid on their stock. The figures were small. I then went round the room again and asked, "Is there any man here who would have made a profit at all if he had worked out the accounts on the replacement instead of on historical costs?" And the answer was, "No". In other words, my Lords, we are in a position in which British industry is being compelled by the Treasury regulations to pay out its capital assets as dividends and taxes. This has been going on for a very long time and I believe it is the real reason why British industry is bereft of the capital resources that it needs to replace machines which are wearing out. As the noble Lord, Lord Orr-Ewing, said a moment ago, inflation accounting is being discussed—

LORD ORR-EWING

I think it is now permissibly to do inflation accounting. In fact Tube Investments announced their results this very week in inflation accounting terms. Although it should not be encouraged from the Treasury, it is not at the moment prohibited by the Treasury.

LORD BOWDEN

I was coming to that point, but I thank the noble Lord very much for making it for me. May I come back for a moment, because it is crucially important, to my argument. As a result of this failure to invest over many years the profits made on ordinary common stock in big firms are extraordinarily I think that I.C.I. made 5½ per cent on its invested capital last year. The machine tool trade made about 3 per cent. the paper trade made about 2 per cent. This was at a time when one could get 15 per cent. or 20 per cent. by investing in short-term loans or even in Manchester Corporation stock.

Who is going to put money into industry if he can get three times as much by putting it into building societies or into gilt edge stock, which is absolutely guaranteed and which is paying 15 or 20 per cent.? In fact it has turned out, my Lords, that because of the inflation it has been possible to borrow money for mortgages at negative rates of interest. If you allow for taxation you made more on inflation than you paid on your mortgage. It has been quite impossible to persuade people to put money into industry on the scale necessary at a time when all the funds are going elsewhere. In fact, many large firms have sold off their assets, acquired a vast pool of liquid resources and used them on short-term loans to keep the manufacturing enterprises alive. You can hardly conceive of a more extraordinary and foolish way of doing business; yet several firms have survived for this and for no other reason.

There are other matters connected with this problem which are of vital importance. I was speaking the other day to the chairman of one of the largest manufacturers of textiles in the world. He told me that throughout the greater part of his business life he had decided that the best thing to do was to look after his men, to re-equip his firm and, generally speaking, to do what every good business man is in principle expected (hopefully) to do. He then discovered—and he said that he lay awake all night worrying about it—that as a result of this the dividends he had paid had been small and the capital assets of his firm were very much greater than its Stock Exchange valuation which was related solely to the dividends he was paying. He realised that he was ripe for a takeover bid which he could not have resisted. Someone might have made an enormous fortune at the expense of the total ruin of a large part of the textile trade of Lancashire. This is due to the impossibility of making allowance for the appreciation of the fixed assets and the other parts of the ordinary balance sheet of a company.

If a businessman does his accounts according to the present basis it does not pay to modernise a firm. Many a big firm has computed whether or not it should re-equip itself with new apparatus and new machines, and far too many have found that once they have written off old machines completely they cannot afford to re-equip with new. That is why many big factories in England are so ill-equipped; the costing system makes it pay to go on using equipment which logically should have been written off, and not re-equip with modern and sophisticated equipment. That is why accountants can ruin a firm.

All of these things are a consequence of the same failure and the same problem—the fact that we do not accept as a matter of course that inflation is with us to stay. We still assume that it is a minor aberration and that we can ignore it and shall then be able to forget it. In fact it has become the principal motivating force of a great deal of the financial world. Takeover bids depend upon it. The ill equipment of British industry is due to it. The enormous profits made by housing speculators are due to it. The plea I make to Her Majesty's Government is that we should attempt most urgently to consider not merely the system of inflation accounting which has been recommended to us by the chartered accountants but the far more sophisticated and far more highly developed and more effective system which is currently in use in Brazil. I have read the papers which our accountants have produced and they seem to me to be an admirable first step, but they did not seem to me in any way to cope with the problems as they really exist.

The best system in Europe, which is probably known to many noble Lords, is that currently in use by the Phillips company in Eindhoven, who have a most sophisticated way of handling their accounts. But no British firm has ever been able to introduce a totally different system of evaluating its assets so that it pays it to invest, to treat its men properly and to build up the resources which are needed for manufacture.

At the moment we have the most elaborate disincentive for doing all these things which could be devised. The rigidity of the Treasury's rulings and the fact of inflation can destroy us. I believe that the new change, which is towards inflation-accounting, and is tremendously to be welcomed, will not cope with the problems in their present form.

We must do more than we have hitherto done to allow for the proper assessment in the balance sheets of our great companies of their true wealth, both fixed assets and work in progress, which is extremely important, as well as the machine tools which are wearing out. The particular problem of work in progress is viciously difficult to handle in those concerns which manufacture capital goods, or anything which lakes a long time to build, for example Rolls-Royce aero engines or turbo-alternator sets, which may be in the shop two or three years.

The value of the work in progress is reassessed every year and a company which has six engines under construction this year and had six under construction last year in effect pays tax on the difference between the value to-day and last year. It is paying tax as a householder would pay were his house reassessed every year and were he required to pay income tax on the difference between the value this year and last. I repeat, the average Englishman nearly doubles his income in a curiously meaningless but nevertheless very important sense by living in his house, and one can imagine just what would happen if industrial conventions applied to ordinary householders.

We are in an extraordinary situation, and we have devised a fiscal system which almost inevitably bleeds industry of its precious capital resources. At the same time we are pumping money back into British industry via the Department of Trade and Industry, as it was once called (heaven knows what it will be in future!). It is interesting to discover that the total sum which is fed back into industry is about equal to the yield from Corporation tax. The Corporation tax is paid by people who make a profit and who would like to spend it on building up their industry. After going through the Treasury it is redistributed by civil servants, dedicated, hard-working men, none of whom really understand the problems of industry—they cannot hope to do so by the very nature of their training and their experience. I sometimes wonder, in a very sombre mood, whether we would not do better to abolish Corporation tax and the whole Department of Trade and Industry, balance our books and leave a large number of civil servants free for more profitable enterprises.

However, this was not the point I wished to make. I believe we are in fact in the position of a surgeon having a patient on the operating table who, having severed the patient's artery finds he is bleeding to death and is now force feeding him. We must do something very different and I really believe—and I repeat it—that odd though it may seem to us the most important lesson to be learned may come from Brazil.

5.57 p.m.

LORD HEWLETT

My Lords, in company with many other noble Lords I feel a real sense of appreciation towards my noble friend Lord Erroll of Hale for raising this subject of the Government's attitude to industry, and I congratulate him further on his impeccable timing. Many of us recall the noble Lord in another place as a most successful Minister of State at the Board of Trade, and later the President of the Board of Trade.

I wish also to make reference to the contribution of the noble Lord, Lord Beswick, the Deputy Leader of the House, who made a most conciliatory speech regarding the profits of industry. But, with respect, those of a very Left Wing persuasion in another place appointed to the Industry and Trade Ministries are the ones who cause alarm in the country and in industry at large. Certainly the noble Lord, Lord Beswick, by the assurances he gave last week, and this, caused just that sense of stability and confidence for which industry is looking. But, alas! this is not the guiding Chamber: it is the other Chamber which takes the decisions: and those who have been appointed to those offices frankly have to be remembered more for what they said from the Back Benches and from the country outside than what they may have been tempted to say in the last three weeks as brand new Ministers. I hope they will prove themselves wiser in office than they have been as Back-Benchers.

Yesterday there was afforded to the Chancellor of the Exchequer in another place the opportunity of superseding what he had said in an utterly divisive and disruptive speech at the Labour Party Conference in Blackpool last October. In my opinion we could have done with a far less partisan and a much more unifying Budget than he has in fact put forward. Above all, I would have begged him to consider giving some more serious incentive for industrial investment and increased productivity. I am not speaking of the interests of the shareholders alone, but of those who aspire to positions of greater responsibility on the shop floor, or in middle management. Quite frankly, I do not care where their efforts are; they ought to be channelled and encouraged in a positive manner.

My Lords, what do we see in this particular Socialist Budget? It aims, alas! almost wholly at redistribution instead of creation of wealth. When we need confidence born of stability we are informed that we can wait another six months for another Budget. This must be endured as a sort of second dose of medicine, and it will be administered at that time without any indication of why this should be necessary, other than for the creation of a wealth and a gift tax. But pity the poor patient, Great Britain Limited, who is waiting to know what else is in the medicine. It may be highly deflationary; it may be terribly inflationary. It may be neutral; there may be nothing there. But heavens above! once a year is enough to go through this turmoil of disorganisation and lack of confidence throughout industrial society. An emergency Budget is bad enough, but to have a scheduled emergency Budget for six months hence is a positive disincentive for industry to take a decision.

I would think more of the comments of the noble Lord, Lord Beswick, if he had been able to persuade his colleagues that this type of nervous approach to the whole problem is inhibiting the very progress that all of us in this Chamber, and I am sure in the other place, wish to achieve for this country.

THE MINISTER OF STATE, DEPARTMENT OF ENERGY (LORD BALOGH)

My Lords, may I ask the noble Lord what particularly influential and persuasive incentives were given to British industry under the Conservative Government, especially in the last six months?

LORD HEWLETT

My Lords, in the last Budget—not the November emergency Budget which only affected public expenditure, but for industry itself—there were considerable investment allowances, a reduction of direct taxation, full benefit and accord and much encouragement given through the various Government Ministries towards exports, help in training in regard to export matters, something I seriously believe we have to achieve. One of the institutes of which I hear almost nothing said is the Institute of Export. I would strongly answer the noble Lord, Lord Shinwell, that here again I do not want the Government to run the institutes, but I do wish that serious encouragement could be given by Government Departments to see that there is better training in industrial exporting from this country. With respect to the noble Lord, Lord Balogh, what we least received from the Conservative Government was positive financial encouragement and incentive; what we received yesterday was two-thirds of four-fifths of the square root of—I must be careful, and say very little. Absolutely nothing in fact was given by way of incentive or encouragement to industry.

My Lords, in the course of my further remarks I will show why in my opinion there were positive disincentives given yesterday. Adjusted, encouraged additional investment—how right the noble Lord, Lord Bowden, was in the comments he has just concluded! In the presence of the noble Lord, Lord Balogh, I would say I hope we will not go to Hungary, on the past experience we have had from the economists, but maybe we should go to Brazil. I have been to Brazil on industrial work and must confess that I was very impressed with the manner in which they have been able to cope with phenomenal inflation. It really has been colossal. On one occasion I inquired what was the going interest rate (it was my first visit to Sao Paulo) and I was told "6 per cent.", which I thought was reasonable; but they added "per month". This is the kind of experience through which they have been, as the noble Lord, Lord Bowden, knows: Inflation rates at colossal percentages, far more than we could contemplate being able to tolerate. But I strongly support (if I may interpose remarks from my own speech to comment on his) the idea that we have much to learn from a country that has been able to cope with such hyper-inflation.

This is no Party political point. No matter which Government are in power, let us not be too proud to see whether a complete revolution in terms of our industrial accounting, and therefore in terms of the fiscal incidence of such things as a new Budget, may not create the wholly different set of values which, as the noble Lord was right to point out, is required. We must find a system which will not only give incentives, but will make it pay for industry to invest in new capital equipment, and not be proud of the clapped-out, longest lasting, broken down old things they have got, which they are still living off and which have been written down God knows how many times. This is not progress, but is merely tempting competition to put one out of business once and for all.

My Lords, I wonder why there has been such a lack of appreciation of the need for increased industrial investment in some sectors in this House. Frankly, I cannot see why, because the growth in the economy was so necessary as to cause it to be the one subject on which the T.U.C. pressed the last Government so strongly, and in my opinion so rightly. Only if we get positive, actual growth, and not simple accounting growth in its present form will we achieve the type of prosperity which would allow us to have far better standards of living, rates of pay, investment in industry, and so on. But certainly some Socialists, and certainly not the noble Lord, Lord Mais, who has just left the Chamber, feel that, like profit, the word "investment", and even the concept of risk-bearing, are not things to be admired or undertaken. This does apply.

I have only been in politics for 25 years and have always paid more attention to what the Opposition have said than to what has been said on my own side, because that is the only way to learn something. There has been this concept of anti-profit, and it is not so long ago that it was almost a household attitude of the Party of Her Majesty's present Government that profit as such is not desirable. But it is highly desirable; indeed, it is essential, and so is risk-bearing. One will not have risk-bearing unless one can offer adequate reward for the risk taken. In some cases, to some people's minds, this must be colossal: but if the risk is really large—and I am not speaking in speculative terms in commodities, but in terms of actual manufacturing risk, undertaking new processes for new industries—then there must be proper reward for the enterprise.

Those companies who have recently invested heavily have been told, if the Financial Times of the day before yesterday is to be believed, that there is pending an announcement that the profits of companies should be reduced not only in the distributive, but also in the manufacturing industries. Seriously, having followed, whether it be of one Party or the other I care not, Government policy of heavy investment in industry, are we to accept that the reward for this should be that automatically you are cut in terms of the profit? If that is the case, clearly it is a positive disincentive to invest.

My Lords, in yesterday's Budget we had not an S.E.T., but an E.T., an employment tax, or a poll tax if you like, the additional 44p per employee. This will look a sick thing indeed if, as has been predicted in many quarters, and not least in the United States, the world is threatened with widespread trade recession this autumn. I know the benefits of increased old-age pension and so on must be paid for, but I cannot for the life of me see why it should be industry which is "nobbled". It seems to me very much better that either we accept it in terms of indirect taxation, and V.A.T. adjustment, or even in terms of direct personal taxation. But to "clobber" industry at the time when it has undergone such a traumatic experience and come through so exceptionally well, seems to me to be foolish.

I echo the sentiments of my noble friend, who spoke, in my opinion, so well upon not only the aspects of Concorde but also the achievements of free enterprise in the three-day working week. My own experience was that we made 80 per cent. manufacture in 60 per cent. time—probably a little more. I know that some cynics would say that that just shows that nobody had been working hard when officially they were working 100 per cent., but I do not put that construction upon it. I take exactly the line of the noble Lord, Lord Orr-Ewing, in saying that this demonstrates that there is a fund of good will on all sides and in all parts of industry, and that if only we stopped messing industry about politically we would achieve a great deal more.

I do not myself believe that Government interference in the affairs and conduct of industry should be more than to set the parameters and then allow industry to make a success in its own way. I would put it this way: that I think the true duties of Government are to defend the nation and its interests, both at home and abroad; to try to maintain the value of its money, and to protect the aged and sick and those in need. From the positive standpoint Government ought to create the conditions in which industry and agriculture can prosper, not to try to do it for them but to create the very conditions; and that includes, in my opinion, not doing some of the things that were done yesterday. A fat lot of encouragement it is if you increase corporation tax, increase employer contributions by 44p, continue with restriction of dividends, enforce reductions of price, and a moratorium on price increases, which cannot now be made before intervals of one to three months! Do this Government or any other seriously believe that those of us who may work fifteen or seventeen hours a day in industry, more from a sense of pride and self-respect than for the actual reward, can be expected to do so indefinitely irrespective of positive disincentives?

I am sorry that the noble Lord, Lord Balogh, has gone from the Chamber because I promised I would deal with incentives, and I think that when he conies to read Hansard he will realise that I have not just touched on the matter. Would you believe it! there is now even to be a higher tax upon savings income, which is called unearned income. In many instances, the capital on which this interest is received represents the savings of a person in the whole of his or her lifetime. Yet, derogatorily, it is called "unearned income", as though it were the result of some swindle or hand-out. There is to be a gift tax and a wealth tax. For heaven's sake! what else will they think of in order to try to hit down the people who want to make a positive contribution, be it on the shop floor, in the management section, in the boardroom—I care not where. The whole attitude is so utterly negative. By September, with the wealth and gift tax, one may indeed feel that the voice was the voice of Denis Healey but the hand the hand of Karl Marx.

How right my noble friend Lord Erroll of Hale was to show how badly hit is the younger middle management in this Budget! For heaven's sake, this is the one section that we need to look to: younger management, on the shop floor as well as in the offices, the drawing offices, research or development departments, or wherever it may be. Those are the people who are going to make the future for industry in this country; upon whom we, in our dotage, are going to rely; for we are going one day to be the pensioners, and they had better do a better job than we are doing if we are to have any sort of existence. To say that it will be essential to have savings is so right. What will be the result of this confounded Budget for the younger man in industry, the highly qualified young executive type, management type? Alas! it will be the usual, the upsurge of the brain-drain which accompanies almost every Socialist Government Budget.

And, my Lords, the poor are not really benefiting. There are increased pensions and certain concessions, but we have the massive increases in electricity prices and coal prices to come. North Sea gas is to come up perhaps to the tune of 70 per cent. Surely we know that these are the very death knell of encouragement and happiness for the old-age pensioners. How much better it would have been if, instead of the overall totally unselective food price subsidy, there had been more positive actual help in large term to those genuinely in need! There is nothing improper about such a suggestion. The old phrase of "means test", and so forth, is frankly "old hat". We have a means test in income tax we have a means test in almost every tax we have to face.

As the noble Baroness, Lady Seear, said, it is yet again the fact that the true intention of the Budget has not been achieved. Its effect will not be to help the poor, still less to help industry; rather will it "clobber" it. Massive increases in taxation, raw material costs up, and we are still under the threat of an engineers' overtime ban and other major disruptions. Sometimes I feel almost desperate at the woeful lack of industrial knowledge and experience by the so-called professional politicians. Would that they had actually been employed in industry! I wonder if they could now be employed by industry. Frankly, I doubt it.

With the vast increases—and I am speaking only of the chemical industry; the petrochemical raw material prices inevitably following the huge upsurge in feedstock costs—who could be seriously suggesting the viability of a minimum three-month interval between manufacturing price increases? Do the Government want to shut plant and half industry altogether, at this of all times? I think not.

Constituents of some of our manufactures—and we are only a small company in business—include the following products: phenol, the price of which was in January, 1974, £103 per 1,000 kilos; in February, £130, in March £203; methyl oxitol, January to March, £190, £192, £233; xylene, £177, £185, £201. Or, take this for a beauty: aniline, early February, £166; late February, £170; early March, £224. In April?—God knows! Frankly, who on earth is going to say we can hold prices for three months and go on manufacturing with these increased raw material prices? How can an industry or an individual company do that? The answer is that it puts up the shutters on that particular plant until the new price period is allowed to start. The result is to force outside purchase, probably from abroad, with a loss of foreign currency, to keep one's customers going because one cannot afford to keep the plant going oneself.

Lest your Lordships think I am dealing purely with hard organic chemicals, let us deal with some natural products. In September 1973, the price of rape oil was £210 a thousand kilos; its price to-day is £410—an increase of £200 on £210. Flow on earth can any Government seriously suggest that industry can go on absorbing costs at that sort of rate, and accept at the same time increased taxation, increased Government costs and increased nationalisation supply costs in just the following little list: rail freight, steel, coal, electricity, and even postage; and crippling interest charges to boot? Come off it! my Lords, we cannot start making suggestions that a three-month interval between price increases is viable; it may be desirable, but that is Cloud Cuckoo-land. Let us get down to the realities. Some of us have actually to run a business and not just talk about it.

There had better be a degree of flexibility which allows a person as an industry to make a reasonable return on capital. There has to be positive incentive to invest money in industry, as the noble Lord, Lord Bowden, has emphasised very strongly, and many other noble Lords, too. Unless we get ourselves into such a situation as to not only encourage but actually effect large-scale industrial investment it will be too late. A far more enlightened attitude must be displayed by Her Majesty's Government towards both industry and agriculture. Britain cannot prosper unless this is shown. In such a disastrous situation of lowering investment rates, diminution of profits, there can be little or no "cake" about which to squabble.

6.20 p.m.

LORD SNOW

My Lords, I think that I had better lower the temperature a bit. I have not inflicted myself on your Lordships' House for a long time, partly because I was personally committed to other things and partly, I confess, because I found myself totally out of sympathy with the general air of optimism which I found surrounding me, for I have viewed the situation for years, and certainly as much now as ever, with the utmost sombreness. I have no doubt that we are in a desperate situation. I am using the word "desperate" deliberately.

We are a special case in a general way that is true of almost the whole of what we call the advanced, rich or industrial world. For various technical reasons we happen to be in a much more precarious situation than any other of the rich industrial nations. They all have inflation, they are all living with a kind of strange complex of inflationary recession, but we are at the most vulnerable, perhaps along with Italy and, I sometimes think, Japan. We are really under threat. By this I do not mean that the entire population of this island is going to be wiped out or have no means of earning a living; what I mean is that I find it extraordinarily hard to believe that Parliamentary democracy, as we know it, can conceivably survive ten years at the rate of inflation under which we are now living. I think that that is absolutely unthinkable. I agree with my noble friend Lord Bowden that we could probably learn something from Brazil, but if we do I am almost sure that we should learn that you would have to have a type of Brazilian Government to cope with the situation as well as the gimmicks of accountancy. I cannot conceive that Parliamentary democracy, in any form that is known in the world, is going to survive for long with an inflationary rate as it is at present. Hence my gloom, and the gloom that I have been feeling for several years.

I do not wish to give your Lordships the impression that I think that this Government are not the most suitable to try to tackle this set of problems. In fact, I believe that they are the only type of government which would stand the remotest chance. They are a very able Government, an exceptionally able Government. When I hear the noble Lord, Lord Hewlett, I confess that I think that he is not living on the same planet as most of his fellow countrymen. This is a Government of high intelligence, high ability, and from those I know, of very good judgment. Though I think that all those of your Lordships who know me know that I am comparatively capable of detachment, I must say that when some noble Lords opposite come and address us as though they have been supporters of a highly successful Government with an incomparable record for judgment, I really wonder what they can conceivably be intoxicated by. No Government in English history have ever made more misjudgments in three and a half years. It is not possible. An ordinary set of men, normally in any sort of Government, tend to guess or judge right about 50 per cent. of the time—that is about as good as statistical chance. It takes something like negative genius to be wrong about 95 per cent. of the time.

However, the time is too serious for this sort of Parliamentary ping-pong, and I should like to talk about the fears that I possess and to which I see no real answer. Obviously we have to try anything—any kind of gimmickry of the accountants' kind that my noble friend Lord Bowden suggests, and anything else. But the danger is that we are living in a very strange world; we are living in a sort of economic tempest, and at the same time a social tempest outside the frontiers of the rich world. This is going to make immense complications, at the best, for all of us, and probably something much more serious than complications. Remember that some of the predictions which some of us have made are coming only too true. The poor world is really growing, as we said it would grow, in population, and it is having the famines which, with deep regret, we have talked about for years. That is now happening in India and Ethiopia, and it will go on.

Some parts of the world which have recently been poor are also beginning to realise their power. If you listen to the statements of say, Sheikh Yamani, or the Shah of Persia, you can see how we are being regarded by people no longer poor—who in fact in certain strata have suddenly become immeasurably rich, but are still speaking like the underprivileged world—and they are going to exact their price. It is perfectly reasonable. Remember we talk of equality, and I am entirely for it. It is clearly part of a society which can begin to live together in peace. But remember equality does not stop at the frontiers of the rich world. Other people are beginning to talk about equality. The poor of India and Africa are beginning to say, "Fine, your unions object to a differential of, perhaps, ten times between skilled workers and management, but remember there is a differential of ten times between skilled workers and the ordinary Indian workers, and this disparity cannot exist for long."

There is going to be another kind of equality demanded by the overwhelming population of the world before very long. That will mean that ultimately the whole of the rich world is going to live very much more simply than it is living now. I cannot believe that in 50 years our descendants will not begin to think that the middle classes, and most of the working class in the rich world, lived more prosperously than large populations are ever going to live again. I should think that that is far more likely than not. When Mr. Harold Macmillan said, "You have never had it so good", he might also have changed the tense and said, "You will never have it so good again". It is a temporary phase in human history. It is awkward for us, we have had to live through it, but we have had materially not too bad a time. In fact, I believe that the real prescription for this country is a far more austere life, and far more effective work. If any politician really wanted to stir this country he would have to do another Churchillian adaptation of Garibaldi's, "Blood, toil, sweat and tears". That is the only maxim that has any conceivable meaning in the situation as I see it.

Finally, we have become intoxicated with money. It is no reproach to any of us; it is part of the climate of our time and our society. But though we are rather prudish in talking about it, it is at the back of our minds to an extent which in other societies seems as abnormal as complete preoccupation with sex. We are obsessive about money in all sorts of ways, and we cannot really believe that there is any other motive which makes men perform at all. I was dis-stressed during the Election to hear almost exactly the same point made by the then Prime Minister as was made by the noble Lord, Lord Erroll of Hale, about the necessity of giving incentives to people at the top of large companies; that a chairman who was receiving £55,000 a year was about to receive £65,000 a year, and that this was a necessary reward for responsibility. This is sheer nonsense. People do these jobs, on the whole, because they like them. Does anyone in this House believe that if the Prime Minister's salary was reduced by half, reduced to, say, £10,000 or £8.000 a year, there would be any shortage of applicants from the House of Commons? It is a great reproach to our official life, a great reproach to people in high places, that they willingly accept this kind of argument for increasing their own salary. This is a kind of corruption that of course inflation brings. It is a very natural consequence of inflation, and it has done us great harm.

On the other side, it is extremely foolish that it should be regarded as a natural right of man that everyone's standard of living so-called—meaning their purchasing power—should automatically advance year by year. No such extraordinary axiom has ever been thought of by comparatively rational man in the whole of human society; it is utterly new. It would not have occurred even forty years ago, but now it is regarded as a right of man. Unless we break this obsession, this preoccupation and this lack of reality, we shall get nowhere.

In conclusion, there are immense political rewards for anyone with imagination who can suggest to a population like ourselves that there may be a purpose and a driving force other than money. This is what great revolutions produce. It is what Hitler produced: it is what the Russian revolution produced, and it is, above all, what the Chinese revolution produced. Anyone who can do that will give us a purpose which has been lost for a long time, because of the chances of history and the extreme materialism into which our sort of society has descended. If that purpose could be achieved, it might allow us to look more respectable than we are now.

LORD HEWLETT

My Lords, before the noble Lord sits down perhaps I may ask a question. He made a reference to me at the opening of his speech and said that I appeared to be living on another planet. I do not know whether there is anything more earthly than the chemical industry or Manchester. The noble Lord did not reply to any of the points that I made. I wonder whether he can elucidate on how I can be from another planet, or did he just not understand what I said?

LORD SNOW

My Lords, I believe that I understood the noble Lord very well. That is why I said that he might be living on another planet. He has absolutely no idea of what the majority of people in this country, as they proved by their votes, think of the kind of views that he expressed.

LORD HEWLETT

No, my Lords—

SEVERAL NOBLE LORDS

Order!

6.32 p.m.

LORD GRANVILLE OF EYE

My Lords, I shall not attempt to follow the very interesting speech of my noble friend Lord Snow, with many of whose arguments I found myself in agreement on the very broad canvas which he painted. We are indebted to the noble Lord, Lord Erroll of Hale, for introducing this subject although we debated it last week. I always listen with the greatest interest to my noble friend the Deputy Leader of the House on this subject, and I thought he threw out a challenge to the manufacturing industries of this country to try to help our balance of payments position by exporting more, particularly to the Continent.

I hope very much that the manufacturing industries of this country, which are complex and quite varied, will take notice of this challenge and will attempt to meet it. I say that because when we entered the E.E.C. we gave the United Kingdom consumers' market to the Continent on a plate. The E.E.C. countries were ready but we were not, and in consequence they have a head start and have been exporting very large quantities of consumer goods to the retail markets of this country, as is shown by the number of container lorries on the roads.

I am not a pessimist about our future, but I was a little surprised at the complacency which was shown in the debate and in the Press, and which one has met in the country. I do not wish to go back to last week's debate in this House, but there seems to be an inexplicable complacency about the results of the three-day week, about the miners' stoppage and about the oil price increases. As the noble Lord, Lord Hewlett, said, not only are there fantastic increases in the prices of essential raw materials for industry; they are also in short supply. Industries which would like to get back in full swing after the three-day week are finding it extremely difficult to get the vital raw materials which they need for the manufacture of their end-products.

Many people say, "We have these industrial upsets, we have strikes and so on, but we quickly recover." But, my Lords, you cannot allow a jugular vein to be cut for three months without results. These have yet to be seen. Somebody, at some time, will have to pick up the bill, be it industry, consumers, the Government or the Treasury. We have not yet seen the effects in industry, but when we do there will not be so much complacency in the country. I do not ponder so much on why we go in for industrial suicide in this desperate and tragic period, as about how we are to get over it and, one hopes, prevent it from happening again in all its worst aspects, because we in this island just cannot go on behaving like this and still exist.

I should like to make just one reference to the mining dispute, which I feel was a tragedy. Anyone who has had anything to do with the mining industry and with the mechanisation of it, as I have, will realise that for long the mines have been mechanised, and I think that the previous Government intended to invest a further £1,000 million in the final mechanisation of some of them. I should have treated the miners as mechanics. I should have used that sum of money to mechanise this industry completely, and I should have introduced incentive schemes and paid the miners by results, as is done with car workers. If they earned £90 or £100 a week, what would it matter? The mining industry is a vital basic industry of this country which must be efficient, and we must modernise it very quickly if we are to succeed in that respect.

As many noble Lords have said, our recovery from this unfortunate stoppage will depend very much on productivity. If we cannot get increased productivity from the industries of this country and export a great proportion of it, we shall never get over our problem. One of the great disappointments is that the previous Government could not get investment in industry. I have no idea why that was. I do not know whether the City did not have confidence in the set-up or what it was, but, as the noble Lord, Lord Bowden, suggested, there was a lack of investment in industry. We cannot as a nation go on living beyond our means, which is what we have been doing. We have grossly swollen, exaggerated overheads as running costs against our exports.

If I may use a crude colloquialism, there are still too many chasing the fast buck and quick results, and I regret to say that certain sections of our industry have too big a burden of pilferage and stock losses. One asks oneself why this happens. In some industries this burden amounts to 1.5 per cent. of costs. I believe that one of the reasons for it is that the media have created a new universal taste. They have created consumer demand and, naturally, everyone wants more.

I emphasise that as a nation we can afford this standard of living, this refinement of living, only if we can export more of our manufactured goods. If we cannot, we shall have to reduce our standard of living. There is no alternative. All Governments consult the T.U.C. and the C.B.I., and I was glad to note that my noble friend the Deputy Leader of the House referred to-day to the small and medium-sized businesses (I think there was also a reference by the Chancellor of the Exchequer in his Budget speech) because these smaller businesses have had a difficult time as a result of the three-day week. Although it is necessary for Governments to talk to the C.B.I. and the T.U.C. in matters of negotiation, the bulk of the industry of this country comprises medium-sized and small businesses, and these people are wondering when they are to be consulted. We have headlines of the trade unions saying this and the T.U.C. saying that, with Ministers adding their own comments, and these people wonder when they are to be consulted. They are the majority of the manufacturing interests of this country and are, therefore, our business backbone. This leads me to suggest that if we are to establish a revival we must have incentives for middle management. One cannot exist in competition with the great industrial countries of the world unless middle management is right. It is fine to have the top men and the senior executives—they go to schools and to the Financial Times symposium, but the people who carry the heat and burden of the day in British industry are those in middle management.

I regret very much the lack of tax incentive schemes in the Budget. These incentive schemes were taken up not only by senior and middle management but even by workers on the floor. So, my Lords, we in industry always come back to this problem of industrial relations. Every year I attend the European managerial symposium at Davos. I meet overseas managers, industrialists, and economists, and there are two things they will always mention. One is "the English disease", and the other is: "What about your boardroom and shop floor co-operation?". They say, in the most friendly way, "It is too bad that you have a union and management setup that produces spasmodic industrial war. Why don't you do something about it?". That is their view. They say that we have to take the shop floor to the boardroom and not leave it to the personnel managers who must become the new élite in industry. We had also better look at what the "back-room boys" are doing about "holidays from growth". If you discuss this and listen to the debates in Brussels, and to some of the Commissioners, you find that research and discussions have been going on for a long time and have reached an advanced state of whether or not there should be a "holiday from growth", whether we can do with three or four working days a week, and whether we should call a halt in the rat race, sit back and take a "holiday from growth" and enjoy what we have already. This is beginning to get into the thinking of the "backroom boys", and it is a subject that will be transferred to the boardroom tables before long. It may be that it is a fait accompli already and we do not realise it. It may be that we had a revolution and never noticed it. It may be that people have already made up their minds that they do not want to work hard or so long, or that their wives are making up their minds for them.

My Lords, I have no idea when this country will be facing another General Election, but the worst influence (I think the noble Lord, Lord Hewlett, referred to this) in industry is uncertainty. No-one can plan ahead in an atmosphere and conditions of uncertainty. The best stimulus for revival in this country to enable it to meet its future is an injection of confidence, the word you cannot replace with anything else, as we found throughout the difficult days of 1930 to 1931. The worst fear is that of uncontrolled inflation or, what some of us remember, deflation, which you cannot stop or do anything about, and unemployment when nobody invests and nobody spends. As many speakers in the debate have suggested, I believe there is little time left to us to try to bridge the gap at the present time. Everyone says, "Well, if we can exist until the North Sea renaissance comes along and we have a Klondyke bonanza, that is all we have to do." But we have to face the next year and the next two years. It has been remarked that this is perhaps the best Government suited to tackle such a problem. In the tremendous job that the Government have ahead of them, I believe that we should all wish them well.

6.47 p.m.

LORD STRATHCONA AND MOUNT ROYAL

My Lords, I must start by thanking my noble friend Lord Erroll of Hale, who moved his Motion with the clarity and conviction we might expect of somebody with his experience and involvement in industry. However, I do not think I can possibly comment on the number of distinguished speeches we have heard this afternoon. I shall try to confine myself to restating some of the principles which I believe govern our approach to the difficult situation in which we find ourselves, although I must also say that I think almost everything has been stated probably better and certainly by people who know more about this than I.

We are an industrial country, hence the importance of the debate. My noble friend Lord Erroll gave us a vigorous defence of profit. In this he was rather surprisingly supported from the other side of the House by the distinguished noble Lord, Lord Mais. At this juncture, I might point out that the recent profits made by industry, which some people have thought excessive, are the result of investment made two years ago, because that period is the lag of the profit arriving from the investment made in anticipation. The corollary of this point was made by the noble Lord, Lord Orr-Ewing. Investment has been said by many noble Lords to be the key to our industrial success. Without investment we cannot have increased productivity and growth on which to finance the welfare and the rising standard of living to which everybody aspires—in a word, the prosperity of this country. I am not in any way disputing the gloomy forecast made by the noble Lord, Lord Snow; indeed I think it is fair to say that there is a movement abroad of a number of people who feel that we would be better off if we lived simpler lives.

LORD SNOW

My Lords, may I interrupt the noble Lord? I stand by what I said in that respect, but this does not mean that, for instance, I think industry ought not to make profits. I think it is quite essential that they should; but that is rather a different point from the top managers of industry rewarding themselves extremely handsomely. The actual operations must make a profit. Let us realise that in some ways we have to be very tough-minded even if we ride about on bicycles.

LORD STRATHCONA AND MOUNT ROYAL

My Lords, the point I had in mind was that I thought the noble Lord was questioning whether we were right to go on aspiring towards growth and increased welfare across the land.

LORD SNOW

No, not at all.

LORD STRATHCONA AND MOUNT ROYAL

I thank the noble Lord. Many noble Lords have said that the prerequisite for investment is confidence, so the touchstone by which we must judge the Government's actions will be whether these will engender confidence which will produce investment. This was the point made so eloquently by the noble Baroness, Lady Seear, and, again, by the noble Lord, Lord Mais. Many noble Lords touched on the terrifying problem of inflation. There was a wonderful moment when I envisaged the noble Lord, Lord Bowden, I think it was, sending Mr. Wedgwood Benn for what I hoped might be a prolonged study of the situation in Brazil, and I am not really deterred from this suggestion one iota by the misgivings expressed by the noble Lord, Lord Snow, about the type of Government you would have to have.

The worry about this Budget is the fear that an attempt is being made to disguise the effects of inflation by keeping down costs to the consumer by means of subsidies, at least in the short term. Again, this was a point admirably made by the noble Baroness, Lady Seear. Indeed, we have had a great deal of help from the Liberal Benches this afternoon. Furthermore, let us make no mistake: taxing the rich and attacking capital will aggravate matters, simply by transferring the spending power from the saver to the spender—and I do not think one has to be an economist, which I certainly would not claim to be, to understand that. One must therefore ask the Government: have the anti-inflation measures been swept under the carpet? There has been a total silence on this issue since the miners received more money; that is, there has been a silence apart from the announcement of increased prices for coal, oil and electricity. After all, my Lords, this was the issue on which we went to the country and which landed us into the situation in which we now find ourselves.

At this point, perhaps I may say a word or two about industrial relations, to which a number of noble Lords have referred. It would be ridiculous, f think, not to acknowledge that the Industrial Relations Act 1971 was hampered in its operation—indeed, it was emasculated—by the refusal of the powerful trade unions to talk about amending the Act when they found it wanting, even when they were making very full use of the provisions that suited them. At the same time they lost no opportunity to represent the Act, not as a legal framework for the conduct of disputes but as an attack on their legitimacy and their interests. I believe this was also absurd. Indeed, I believe it would be a great pity, as my noble friend and Leader expressed it to me, to treat the Act like King Charles's head—Away with it! What we want now in this new Parliament is to cooperate with any Bill which ensures a framework of law for the fair and orderly conduct of industrial relations.

We have always acknowledged the value of the last Labour Government's work in this field. Indeed, as one noble Lord said, a number of the clauses in our Bill were taken direct from their Bill, even though we deplored their taking to their heels at the first whiff of opposition fire from the unions. But we should add that the proposed legislation as we understand it so far contains some very worrying items. I am thinking in particular of the proposed restoration of legal immunity for those inducing breaches of contract; and I hope I am wrong in thinking that it was suggested that there was to be an extension of picketing rights into areas which would raise grave legal problems and, I should have thought, could not help involving intimidation on a scale which we had never seen before. We are worried that the Government's pursuit of their social contract, which we applaud, may not only dictate inflationary economic decisions but also make them turn a blind eye to the responsibilities, as against the powers, of organised groups in our society. That would be unfair to the vast majority who were not so organised or so protected. Indeed, some of the activities of these groups have to be recognised as being antagonistic to the cherished rights of the individual. These proposals would be partial in law and inflationary in the economy. Obviously, we shall maintain an open mind, but we shall have to look most carefully at any proposals brought before this House which lead us in this direction.

My Lords, this leads me on to a favourite hobbyhorse of mine, because I believe that the one area where industrial relations are handled so much better than anywhere else is in the smaller firms. We have always had a nagging suspicion that Labour Governments have little love for smaller firms because the trade unions have no affection for them since they, the trade unions, are poorly represented in those sort of undertakings. I was therefore very encouraged to see a quote from an article in The Times by Mr. Wedgwood Benn, which has already been referred to on more than one occasion this evening, when he said: I recognise small companies do very well. That is a promising start from someone who has always been identified in the past with what I might call the "bigger is better" syndrome.

In connection with small companies, I think it is worth repeating statistics which have been mentioned before in this House. Something like 93 per cent. of companies are, as defined by Bolton, small firms. They produce one-fifth of the G.N.P., employing one-third of the workforce—some 6 million people. This is more than twice the number employed in the public sector. They also produce a higher return on investment across the board than their larger compatriots. The last Government showed their concern for these companies by appointing a special Minister, who the other day made a speech in another place in the debate on the Queen's Speech. So far, my Lords, I am not aware that this Government have announced the appointment of a successor to the Minister for small firms, and this is perhaps something which the Minister will be able to deal with when he comes to reply. The last Government went a long way towards instituting the reforms suggested by Bolton; and may I here applaud the noble Lord, Lord Beswick, and agree totally with him, when he pointed out that it was the previous Labour Government which called for the Bolton Report.

The last Government eased the problems of non-disclosure under the Companies Act, and the underlying thought here is that the legal requirements of a large company with a number of totally separated shareholders is totally different from the information required in a comparatively small unit where many of the shareholders will be members of the family. There was an attempt to reduce the impact of form-filling and mitigation of tax at the lower levels.

This Budget does positive harm to all industry. A number of noble Lords, including my noble friend Lord Hewlett, had a long list of impositions which this Government are going to impose upon industry. At least, we should be thankful that the increase of corporation tax will be reduced for the smaller firms and I shall be interested to hear whether the Minister can tell us how small firms in this connection will be defined. It is not always an easy problem. It is also worth remembering (perhaps a somewhat jingoistic point) that big business is international and small business is essentially British. I do not suppose that very many small firms pay their directors in the Cayman Islands.

Once again we return to the point that investment in the end has to come from profits, and this is most particularly true of the small firms who do not have ready access to the borrowings available for their larger competitors. The Chancellor said that he is aware of the cash flow and credit problems which will arise from the delayed effects of the three-day week as they work through the economy. I hope that in this connection he will look sympathetically at the proposal which has been put forward by the Smaller Businesses Association for a credit guarantee scheme, analogous to the arrangements which are made for the export credit guarantee. That would help to alleviate the needs of some of the small firms and above all would ensure them continuity in their investment plans. As a number of noble Lords have said, the resilience of the small companies was shown by the remarkable way in which they reacted to the three-day week.

There are a couple of other points upon which I should like to touch. The noble Lord, Lord Beswick, mentioned in his speech what he called the "planning agreement with the laudable aim of giving firms a better opportunity. I am not quite clear, my Lords, how this planning agreement is related to the existing organisations such as Neddy. The other point which the noble Lord, Lord Beswick, mentioned was the Companies Act and his exchange with the noble Earl, Lord Limerick. He did indeed give a rather disappointing reply to my noble friend on that occasion. I must regret that there is no intention to reorganise some necessary workmanlike and broadly uncontroversial measures on which so much effort and Government time had already been spent.

My Lords, I think we can say that so far as industry is concerned the Budget speech was far from reassuring. The expression of the noble Baroness, Lady Seear, that industry had been "clobbered", has been taken up by a number of other noble Lords. The C.B.I. has gone on record as saying that already the Stage 3 control of prices is biting very hard. In spite of that, I feel sure that the attitude of industry is still, as was said by Paul Chambers in 1964: So we … greet the new Government certainly without hostility, and with every desire to co-operate in measures designed to raise productivity, improve living standards and to achieve progress with long-term stability. Where we disagree we will say so, I hope plainly and constructively. There is much common ground and to the extent that the Government devote their efforts to tilling this fertile area to yield the maximum industrial crop they will command support from these Benches. Let us therefore hope that they will not be lured by some of the signposts erected by some of their wilder men, which I fear might lead us over Government-erected barriers to progress to the and lands of negative egalitarianism.

7.6 p.m.

LORD BESWICK

My Lords, with the permission of the House, if I have it, I shall try to answer some of the points which have been raised, although I am sure that noble Lords, looking at the clock, will not expect me to answer all the many questions which have been posed. I hope that my noble friend—and I hope I can call him that—the noble Lord, Lord Erroll of Hale, is satisfied with the response that he has had to the debate which he has initiated. It has been extraordinarily interesting.

I said to him that in winding up I would answer some of the points which he raised, and the first point concerned small firms, a question which was amplified by the noble Lord, Lord Strathcona and Mount Royal. May I say that apart from the last four words I wholly agreed with the last sentence with which the noble Lord wound up and I appreciated the spirit contained in that last sentence. Now as for small firms, I was asked by the noble Lord, Lord Strathcona and Mount Royal, what were the Ministerial responsibilities in the present Department of Industry. If he turns to the Hansard of the House of Commons of March 25, columns 39 and 40 in the Written Answers, he will find there spelled out that, under my right honourable friend the Secretary of State, I am responsible, with the Under-Secretary of State, Mr. Meacher, for specific industries including iron and steel, aerospace and shipping. The Minister of State, Mr. Heffer, will take responsibility for the Industry Act, regional industrial policy, and small firms; and the Under-Secretary of State, Mr. MacKenzie, will be working with him. The answer to his question therefore is that Mr. Heffer and Mr. MacKenzie will have that direct responsibility that he thinks should be set out.

I am glad that the noble Lord acknowledged that it was a Labour Government which set up the Bolton Committee. I do not know why certain noble Lords should think that there is on the part of the Labour Government or Labour Party people an antagonism towards small firms. I suppose that if there was a count we would probably have as many people working in small firms as there are in large firms. I agree with him that in some of these small firms there is often a wonderful spirit of industrial relations. Following the Report of the Bolton Committee Small Firms Information Centres were set up, and it is interesting to observe the use that has been made of those Centres. Since they were set up they have helped 11,700 inquirers with over 20,000 inquiries, and even though publicity for their work has recently dropped off they are continuing to receive some 500 inquiries a week, ranging over management problems, financial and control problems, technical problems, and help needed with Government regulations, policies and State agencies.

Moreover, it is not simply the action that was taken by the last Labour Government. The noble Lord will no doubt recall that in the Budget my right honourable friend made a specific reference to the relief which he has given to small companies, and I think the noble Lord, Lord Strathcona and Mount Royal, referred to this. A company whose profits do not exceed £15,000 pays tax at a special rate—42 per cent. as against the normal rate of 52 per cent.—and there is a marginal relief given on profits up to £25,000. Therefore I hope we shall hear no more at all about the conflict between the Labour Government and small firms.

LORD STRATHCONA AND MOUNT ROYAL

My Lords, is the noble Lord correct in saying that the small firms bureaux were set up by the Labour Government? I rather thought they were set up by the last Conservative Government; but of course I stand to be corrected.

LORD BESWICK

My Lords, I did not say that: there is no conflict between us. What I said was that the Bolton Committee was set up by the Labour Government and it was following the report made by that Committee that the centres were established.

I was asked by the noble Lords, Lord Erroll and Lord Kings Norton, about the situation in the nuclear energy industry. I am going to read what I am advised is the position, but the language is not mine. We can expect the contribution of nuclear power to our energy needs to increase further in the coming years. Provided safety and reliability can be assured, it will pay us to rely more on nuclear power for electricity generation. We need to decide on the size and shape of our nuclear programme and, interlinking with this, on which thermal reactors should form the basis of that programme. The need for early decisions is balanced by the need to get the decisions right. I have tried to find out when that decision will be made. I am afraid I have not succeeded, but I am told that it will be in the comparatively near future.

I was asked by the noble Lord, Lord Kings Norton, and I think by the noble Lord, Lord Erroll, about the situation on mergers. The position at the moment is clearly unsatisfactory. The Commission's powers in this field are set out in the Treaty of Paris; and to the noble Lord who asked why British companies are now regulated by a body on the Continent I must answer that neither the noble Lord, Lord Kings Norton, nor I was able to set aside or stop certain legislation which passed through this House under the previous Government. That legislation means that Article 66 gives the Commission certain powers to regulate mergers. It is true that, by comparison with the system used in the United Kingdom, the procedure appears to work slowly. Even recognising that it is frequently difficult to reach a fair and balanced view in such cases, and that there may be special procedural difficulties (such as the need to translate documents into other languages), there is still unaccountable delay. This point, among others, has been kept very much in mind when considering the more general draft Regulation for controlling mergers which the Commission have recently issued.

Representative groups from industry, the C.B.I. and the City have voiced their concern about it. Consultation will be widened, I promise noble Lords, to ensure that the United Kingdom will be able to present a representative view on all the issues raised by this draft Regulation in forthcoming discussions with the Commission. I will see that in the general discussions about renegotiation account is taken of the point made by the noble Lord, Lord Kings Norton. As he said, Commissioner Borschette and the Director-General of Competition visited London yesterday at the C.B.I.s invitation to hear at first hand a presentation on the British system for regulating mergers. They have well in mind the need for decisions to be reached as quickly and responsibly as is possible. I say that about the general position. I think the noble Lord will accept that it would be difficult for me to say more about the proposed merger of G.K.N. and Miles Druce.

The noble Lord, Lord Bernstein, I was pleased to hear, asked noble Lords opposite whether they realised when they were criticising the Government for the present situation, that we had been in power for only three weeks. It is quite true that the Chancellor's decision to withdraw tax relief on interest on private loans is not directed against industry. It is a fact that those private loans have been a material factor in the money supply of this country. If we are serious in our campaign against inflation, it is inevitable that tax relief for those loans should be stopped.

My noble friend Lord Bowden suggested that we might have a lot to learn from Brazil. I have a great delight in watching Brazilian footballers when the opportunity arises, but I am not absolutely sure that we can learn a lot from Brazil so far as our own inflationary problems are concerned. There are cer- tain differences between that country and our own—for example, I gather they devalue their currency roughly every forty days; they are not averse to revolutions; they have more material resources and more manpower, and their political system is distinctly different from ours. Though it has advantages in some respects it has disadvantages in others, and I would not have thought that we should necessarily copy what they do.

I was fascinated by what my noble friend said concerning the difficulties of the manufacturers of machine tools who went to see him; but. I do feel, with the noble Lord, Lord Orr-Ewing, that he would do well to advise them to consult their accountants again, because there are now methods of inflationary accounting which would obviate the kinds of difficulties that he mentioned.

LORD BOWDEN

My Lords, may I interrupt for one moment? I hope I did not give my noble friend the impression that I admired the Brazilian political system. What I said was that they have learned to live with inflation and they accept it as inevitable. Our problem is that we regard it as a temporary aberration and suppose that it will eventually go away again. We have never learned to cope with it. I believe that is true. As for the machine tool trade, the people there, as you know, are in very deep trouble and, in fact, they could not pay a dividend at all if they kept accounts properly.

LORD BESWICK

My Lords, I am much obliged to my noble friend. I was glad to agree with the noble Lord, Lord Polwarth, when he said that Scotland was an asset and not a liability; but I was surprised to hear him say that nothing was said in the Chancellor's speech about regional problems—because the Chancellor did go out of his way to say that the Regional Employment Premium was being maintained. I was grateful to the noble Lord for paying a tribute to what was being done by officials of the Department of Industry in Glasgow at the present time.

LORD POLWARTH

My Lords, I feel that perhaps the noble Lord misunderstood me slightly. I do not think I said that nothing had been mentioned in the Chancellor's speech about the continuation of regional policies but that nothing in the speech seemed to offer much encouragement to industry as a whole.

LORD BESWICK

My Lords, I shall refer to that point again later. I may have been mistaken, but I thought the noble Lord made a special point that we had not put sufficient emphasis on the regional problem. The noble Lord went on to speak about the investment plans of the British Steel Corporation. There is a problem here. They have a most important plan and it is essential that they get on with it. Nevertheless, if we are concerned about regional problems, there are cases where the proposed closures do seem to bear particularly severely upon certain regions. It is essential, therefore, that in particular cases we have a look again at what it is proposed to do to alleviate the unemployment problem which might otherwise be created.

The noble Lord, Lord Orr-Ewing, spoke about figures which had been published regarding the Concorde aircraft. I heard what he said with great interest, and read what he wrote in the Daily Telegraph. He may well be right about that figure of £80 million. It is being looked at again in the light of the many comments which have been made since the figure was published, and what he said about it will also be taken into account. I was interested in what he said about profits, and he will not expect me to repeat what I said at the beginning. I agree with him in so far as he said that if there were an inflationary technique of accounting some of the balance sheets of companies would present a very different picture indeed. I could not understand what he meant when he spoke about the tax on petrol. Here again noble Lords opposite are, I fear, too ready to believe that the Labour Government is out to hit industry. The V.A.T. on petrol will make no difference either to industrial lorries or to buses and bus fares.

My noble friend Lord Mais spoke about steel imported into this country, and about steel which had possibly previously been exported at a greatly lower figure from this country. This is a problem about which we have heard a good deal. I gather when we come down to getting individual cases it is much more difficult to establish the facts. If the noble Lord has any particular facts I shall be glad to hear from him about them; and if there are any importers who are overcharging, the Price Commission will come into the matter. It would be a good thing to put the facts before that Commission. The noble Lord will probably agree that some of the problems to which he referred will disappear now that there is this increase in the list prices of the British Steel Corporation's products.

The noble Lord, Lord Snow, spoke about a desperate situation that was facing us, and I and my noble friends on this side of the House are immensely grateful that he emphasised that this desperate situation, despite what was said by the noble Lord, Lord Hewlett, had not been brought about by Her Majesty's present Government. With his infinitely better grasp of the English language, he put the facts better than I ever could and said that the solution to our problems lies in industry, and in hard work, and not until we accept that are we on the way to recovery. He knows I agreed with him when he spoke of the obsession about economic growth. There is a problem here which human beings in this country and elsewhere are beginning to understand: we need a little more genuine human sympathy than we have hitherto displayed in a mad rush for material possessions.

The noble Lord, Lord Granville of Eye, with his practical experience of industry, complemented what was said by the noble Lord, Lord Snow. He too insisted on the truth that productive industry rather than the slick speculator is where our encouragement should go, I agree with what my noble friend Lord Mais said about confidence and genuine consultation, and the contribution which can be made by the workers in a company if they are given an opportunity to make that contribution. It was good to have the benefit of his practical experience. The noble Lord, Lord Granville of Eye, again complemented what was said by his noble friend.

The noble Baroness, Lady Seear, and several noble Lords, the Lords Erroll of Hale, Polwarth, Orr-Ewing and Hewlett, seemed to think that the taxation announced by the Chancellor of the Exchequer was going to be almost suffocating in its incidence. I think they are exaggerating the effect of the 2 per cent. increase in corporation tax, for example. I cannot think that they are looking at this problem with an objective mind. After all, I am entitled to say that the previous Government tried cutting taxation. What happened then? When taxes were cut, was the money then made available to the private individual always spent in investment? Are noble Lords absolutely satisfied that the savings of the people to whom they referred went in productive industrial investment? I think my noble friend Lord Bowden had much more of the truth when he said that too many of those people were concerned with things like Georgian silver teapots, or vintage wines, or land, or real estate of one kind and another. Too much of the money that was saved was going into those directions. I cannot think that it can be claimed that under a more benign Chancellor of the Exchequer everything was all right. The last Government had as a target for industrial investment an increase of between 12 per cent. and 14 per cent. for the current year. That figure will not be reached—even without the three day week it would scarcely have been reached. Even if it had been reached, it would only have brought us back to the figure which the Labour Government achieved in 1970–71.

Let us look at the other vital issue in this problem—the balance of payments and the gap between what we sell and what we bring in from abroad. When there was a Conservative Chancellor of the Exchequer, when they were cutting taxes, were we narrowing the gap between imports and exports? The fact is that we were not. What we were doing with this money was buying motor cars, possibly foreign motor cars, colour television sets, buying luxuries of one kind and another from abroad. That policy did not help; it brought us to the position where we had to take unpopular measures. I listened to what noble Lords said last week. Almost everyone was saying that the social policies of this Government were not being paid for; we were not taking enough out of the economy. They were afraid that demand would build up and inflationary pressure would not be released. We have done something and now in every case we are told that we are doing the wrong thing. Someone said, "To tax and to please is not given to mankind." One has to recognise that. Nevertheless, I ask noble Lords to see sometimes that the problems that are confronting us are not the making of the present Government. If the noble Lord, Lord Hewlett, wishes to interrupt—

LORD HEWLETT

No, I am transfixed; I could not get up.

LORD BESWICK

My Lords, I finish by saying this. The noble Lord, Lord Snow, touched on something in which I believe very deeply: incentives need not always be considered in terms of material goods. There are many fine things that are done, some of the finest things in human affairs, that are not done for material gain at all. One has only to look back at one's own war experiences to realise how true that is. We are trying a "social compact" as it has been called. We have said we are trying to do certain things and, on the other side, we expect certain things to be done for us. Whether it is going to work out in the way we hope, we do not know. But all I can say is the other way did not work out too well, either. So we are going to try. If we are to succeed it will be on the basis that everybody—members of the trade unions and members of the boardroom, all of us—will have to think a little more about what we can give as well as what we can take. It is in that spirit again that I hope this House will conduct its discussions in the future.

7.30 p.m.

LORD ERROLL OF HALE

My Lords, since there is further business before your Lordships' House, I will be very brief. I should like to thank those noble Lords who have taken part in this debate which I initiated, both for the excellence of their speeches and for their kind references to me for having introduced the topic. In particular, I should like to thank my noble friend for making two very interesting speeches and also for welcoming me back to the debates here after an absence of several years. I should say that I think the debate has proved of great value to those of us who have taken part in it, as showing how much thinking the Government are doing on the matters which we have raised. Of course one could not expect full answers to every point raised. For my part, I was very impressed with the amount of detailed information which my noble friend was able to give to your Lordships. For that I should like to extend to him my personal thanks; and to all of my colleagues, my thanks, too, for having taken part in what has been a most interesting afternoon. I therefore beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.